I often encounter the confusion between frequent purchase programs and Loyalty strategies. I don’t believe these are equivalent and would like to address it.
For a long time, the marketplace has endorsed the lowering of prices as a justifiable form of value-add. And, although a lower price does, in fact, constitute value (more for less), it is hardly productive.
By now, most of us have figured out that the incremental sales achieved by a lowering of price will only last as long as the price advantage. We would all agree this increment should not be attributed to Customer Loyalty.
Points, free merchandise or discounts through frequent purchase programs, no matter how well camouflaged, still result in a perceived reduction of price. And, although customers may act more loyal due to the accumulated points in their frequent purchase accounts, they are in fact, attached to the points, NOT the brand. We should be careful not to equate captivity with LOYALTY.
I have a Delta SkyMiles account. Although I am somewhat captive, I took a United flight to LA (which I don’t like) because it was $200 cheaper. I am somewhat captive, but certainly not LOYAL. Captive audiences will stay as long as it is advantageous, but let’s not say that we are creating LOYALTY.
LOYALTY is the ultimate goal in a commoditized market. To have customers that have accepted our brand as part of their life’s value structure is a privilege and takes hard work. We can’t buy this kind of LOYALTY. If we want it, we’ll need to think about adding value to our customers’ lives, and making them emotional in the process.
Most companies have not been able to quantify the ROI on Customer Loyalty and therefore, find it difficult to commit the resources to creating it.
Instead, we continue to feed the price-erosion monster through masqueraded lower pricing, and add insult to injury, by calling it LOYALTY.
If we want Loyal customers we’ll have to do more than offer double points on any purchase before the end of the month.
Committed to XCS